goldminingXpert (29.39)

Quepasa: Wanna Buy an overvalued social network?

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The Quepasa corporation (QPSA) runs Quepasa.com, a social-networking site aimed at Latinos that's available in English, Spanish, and Portuguese. Shares have soared in the past year as the company has successfully leveraged the enthusiasm driven by its status as the only pure-play publicly-traded social network. While there are numerous other social networks, they are either privately-held or are subsidiares. The publicly-owned include Myspace, which is a subsidiary of News Corporation (NWS) and Orkut.com, which is owned by Google (GOOG).

However, while there is obvious appeal of being the only pure-play social network, traders have gotten overly-excited and shares of Quepasa have soared beyond any reasonable valuation.

Two main problems will plague investors who buy Quepasa now. Quepasa is not the leading social network even within its target demographic of Latinos. Also, Quepasa has a miniscule revenue stream, and much of this revenue is derived from questionable low-quality streams from related parties with conflicts of interest.